The Supreme Court of India, in a significant ruling on September 26, 2025, has dismissed a batch of appeals challenging the resolution plan for M/s Bhushan Power and Steel Limited (BPSL). A three-judge bench, headed by Chief Justice of India B.R. Gavai, upheld the National Company Law Appellate Tribunal (NCLAT) order dated February 17, 2020, which had approved the resolution plan submitted by JSW Steel Limited. The Court rejected all contentions raised by the erstwhile promoters and certain operational creditors, bringing a decisive end to the prolonged legal battle over the control of the debt-laden steel manufacturer.
The judgment settles key legal questions regarding the locus standi of former promoters, the role of the Committee of Creditors (CoC) post-plan approval, delays in implementation, and the distribution of earnings generated during the insolvency process.
Background of the Case
The Corporate Insolvency Resolution Process (CIRP) against BPSL, one of the twelve major corporate defaulters identified by the Reserve Bank of India, commenced on July 26, 2017, following a petition by Punjab National Bank before the National Company Law Tribunal (NCLT). After a competitive bidding process, the resolution plan submitted by JSW Steel Ltd. was approved by the CoC.
On September 5, 2019, the NCLT approved JSW’s plan but imposed certain conditions, including a directive to distribute the Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) generated during the CIRP among the creditors.
This approval was challenged before the NCLAT by multiple parties. JSW challenged the conditions imposed by the NCLT, while the erstwhile promoters and several operational creditors contested the plan’s approval itself. During these proceedings, the Directorate of Enforcement (ED) attached assets of BPSL worth over Rs. 4,025 crore in connection with a money laundering investigation against the former management.
On February 17, 2020, the NCLAT delivered its judgment, allowing JSW’s appeal, modifying the NCLT’s conditions (notably setting aside the EBITDA distribution directive), and dismissing all other appeals. This NCLAT order was the subject of the present batch of appeals before the Supreme Court.
Submissions of the Parties
Appellants’ Arguments (Erstwhile Promoters and Operational Creditors):
The appellants, led by erstwhile promoter Sanjay Singal, raised several objections.
- They argued that as personal guarantors, the promoters were “persons aggrieved” and had the locus standi to challenge the plan.
- It was contended that the resolution plan was legally flawed because a clause allowing the CoC to extend the implementation deadline rendered it indeterminate.
- They asserted that the CoC becomes functus officio (ceases to have legal authority) once the NCLT approves a plan.
- Significant emphasis was placed on the delay in the plan’s implementation by JSW, which they alleged was a strategic move driven by fluctuating steel prices rather than the pending criminal investigations.
- The appellants claimed that the EBITDA earned during the CIRP rightfully belonged to the creditors and should not be handed over to JSW.
- Operational creditors, including Jaldhi Overseas Pte. Limited, M/s. Medi Carrier Private Limited, and CJ Darcl Logistics Limited, argued against their treatment under the plan. Jaldhi contested its classification as a “contingent creditor,” while Medi and Darcl claimed non-payment of pre-CIRP dues allegedly promised by the Resolution Professional (RP).
Respondents’ Arguments (JSW, CoC, and RP):
The respondents vehemently opposed the appeals.
- JSW and the CoC challenged the very maintainability of the appeals filed by the erstwhile promoters, arguing they were not “persons aggrieved” and were attempting to sabotage the resolution process.
- JSW attributed the implementation delay to factors beyond its control, primarily the ED’s attachment of assets and the legal uncertainty it created, which was only resolved after the introduction of Section 32A to the Insolvency and Bankruptcy Code (IBC) and subsequent court clarifications.
- On the issue of EBITDA, JSW argued that the Request for Resolution Plan (RfRP) was silent on its distribution. Relying on the Supreme Court’s judgment in the Essar Steel case, it contended that a successful resolution applicant takes over the company on a “fresh slate” and cannot be burdened with undecided claims.
- The CoC initially supported JSW’s position on EBITDA, stating it had resolved that the amount would remain with the company, but later changed its stance during the final hearings.
- The RP submitted that the resolution plan complied with the law as it stood at the time of approval and that payments which appeared to be for pre-CIRP dues were the result of an accounting error that was subsequently rectified.
Supreme Court’s Analysis and Decision
The Supreme Court meticulously analyzed each issue raised by the parties before dismissing the appeals.
1. Locus Standi of Erstwhile Promoters: The Court held that since a resolution plan affects the rights of guarantors, the erstwhile promoters had the locus to file the appeal. However, it took adverse notice of their conduct, citing the NCLT’s finding that they had made “desperate and frustrated” efforts to cause delays in the proceedings.
2. Existence of the CoC Post-Approval: Rejecting the appellants’ contention, the Court ruled that the CoC does not become functus officio after the NCLT’s approval. It held that the CoC “continues to exist till the Resolution Plan is implemented or an order of liquidation is passed.” The Court reasoned that the CoC has a vital interest in ensuring the plan’s successful implementation, especially when legal challenges are pending.
3. Delay in Implementation: The Court found that the delay was not attributable to JSW. It identified several legitimate impediments, including the NCLT’s modifications, the stay by the NCLAT, the ED’s provisional attachment of assets, and the legal uncertainty surrounding criminal proceedings against the corporate debtor. The Court observed, “both the SRA – JSW and the CoC were making consistent efforts to get the matter sorted out before this Court so as to ensure the expeditious implementation of the Resolution Plan.”
4. Distribution of EBITDA: This was a central issue in the case. The Court unequivocally rejected the claim for EBITDA to be distributed among creditors. Relying on its precedent in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, the Court held that a successful applicant cannot be faced with “undecided” claims post-approval, which would amount to “a hydra head popping up.” Since neither the RfRP nor the resolution plan provided for EBITDA distribution, the claim was extinguished. The Court noted the CoC’s initial stand affirming this position and did not permit it to “make a volte face” at a belated stage. The Court stated, “If such a contention is accepted, it will frustrate the very purpose for which the IBC came to be enacted.”
5. Claims of Operational Creditors:
- Jaldhi Overseas: The Court upheld its classification as a contingent creditor, noting Jaldhi’s own inconsistent stand before the NCLT and the fact that its foreign arbitral awards had not been enforced by an Indian court to become a decree. The Court held that this classification was a matter of the CoC’s “commercial wisdom,” which is non-justiciable.
- Medi and Darcl: The Court found no evidence of an agreement with the RP for the payment of pre-CIRP dues. It accepted the RP’s submission that the initial payments were an accounting error and reiterated the settled law that all pre-CIRP claims can only be dealt with as per the approved resolution plan.
In conclusion, the Court found no merit in the appeals and upheld the NCLAT’s judgment in its entirety, solidifying JSW Steel’s acquisition of Bhushan Power and Steel Limited and underscoring the finality and binding nature of an approved resolution plan under the IBC.
